Appeals court upholds constitutionality of whistleblowers qui tam lawsuits

June 20, 2001 — A recent federal court of appeals ruling coupled with a U.S. Supreme Court decision last year have made clear that any further industry efforts to have the False Claims Act declared unconstitutional are likely to fail.

The Fifth Circuit Court of Appeals ruled last month that whistleblowers may continue their "qui tam" lawsuits brought under the False Claims Act even if the government does not intervene in their cases. (Riley v. St. Luke's Episcopal Hospital, 5th Cir., No. 97-20948, 5/25/01.)

In May 2000, the U.S. Supreme Court upheld the constitutionality of the False Claim Act's qui tam provisions but said that whistleblowers cannot sue states under the federal statute. (Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, U.S., No. 98-1828.)

"Industry has tried since the False Claims Act was amended in 1986 to overturn the law," said John R. Phillips, who worked with Congress on the amendments and whose firm, Phillips & Cohen LLP, specializes in representing whistleblowers in qui tam cases. "This is the last nail in the coffin of constitutional challenges."

The appeals court reversed a ruling by the U.S. District Court for the southern district of Texas. The lower court ruled in 1997 that the provisions of the False Claims Act that allow private citizens to sue for fraud on the government's behalf are unconstitutional. It was the first — and only — court that has found the False Claims Act's qui tam provisions to be unconstitutional.

The government retains significant control over a case, even when it does not intervene, noted the appeals court. "The record before us is devoid of any showing that the government's ability to exercise its authority has been thwarted in cases where it is not an intervenor," said the court's majority.

A divided three-judge panel of the Fifth Circuit previously found that whistleblowers could not continue their qui tam lawsuits if the government did not intervene. But that decision was immediately vacated pending a review and decision by the entire Fifth Circuit.

Qui tam lawsuits have become the federal government's most effective way to fight fraud. It has collected more than $4 billion since 1987 as a result of whistleblower cases, according to the Justice Department.

For more information about this case, see the following news story:

  • "Fifth Circuit reverses earlier decision, rules FCA qui tam provisions constitutional," BNA's Federal Contracts Report, 6/5/01.